Speaking after Statistics South Africa’s release of the manufacturing figures, SEIFSA Chief Economist Henk Langenhoven said that neither the +16% promising recovery in August, nor the 1% further recovery in September could repair the damage.
This, coupled with the October Purchasing Managers’ Index (business activity sub-index) released earlier this month, reflected the difficult recovery dynamics in the sector.
The October 2014 PMI showed a 9% decline on a year ago and a 6% decline on a 12- month basis.
“If the typical lag time of 12 to 18 months holds, the sector will only show material recovery towards the third quarter of 2015,” Mr Langenhoven said.
He added that capacity utilisation figures released by Statistics South Africa earlier showed no improvement for the three quarters of 2014. The average levels of 78% recorded are far below the benchmark of 85% and explain the low levels of investment in the sector.
Official third-quarter employment numbers for the metals and engineering sector have not been released yet. The preliminary estimates from consolidated data emanating from SEIFSA’s members and other sources, covering 10 233 companies, show a 2% decline in employment since June 2014. The estimated number of employees made redundant by the end of October (since June) in the sector is 7 000.
Metals and engineering production increased in September by a mere 1%, but production for the year to date was 3% lower than a year ago and 2% lower on a 12-month basis. Production in September 2014 was 0,5% lower than production in September 2013.
“Any source of uncertainty would be detrimental to the sector’s recovery. Representing 34% of manufacturing production, these numbers drive home the importance of recovery in the sector for manufacturing to gain momentum,” concluded Mr Langenhoven.